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The Super Microphones shares plunged as much as 35% Wednesday morning after the company revealed that its auditor had resigned following months of disagreement with the company over its governance and the independence of its board of directors.
Ernst & Young, in its resignation letter, said it “does not wish to be associated with the financial statements prepared by management.” The accounting firm also raised concerns about the board’s independence from CEO Charles Laing and “other members of management”.
EY was hired to audit Super Micro for the first time for fiscal year 2024, the company said. Super Micro still has not released its financial statements for this year and is reportedly the subject of a federal investigation.
Super Micro makes computers that businesses use as servers for websites, data storage and other applications, including AI algorithms. The company’s clients include major AI players such as Nvidia, AMD And Intel. Shares of Super Micro, which joined the S&P 500 in March, jumped 246% in 2023.
The auditor first flagged issues with Super Micro’s internal financial controls, governance and availability in late July, prompting the server company to appoint a special board committee to investigate on the company’s internal controls.
“We are resigning due to information recently brought to our attention which has caused us to no longer be able to rely on the representations of management and the audit committee,” EY said in its resignation letter. EY’s concerns were raised ahead of the release of a short-selling report targeting Super Micro’s financial controls and accounting practices.
Super Micro has previously encountered problems with regulators over its accounting practices. It paid a $17.5 million fine to the Securities and Exchange Commission in 2020 after the regulator alleged it recorded revenue prematurely and incorrectly.
The company hired the Cooley law firm and a forensic accounting firm to review Super Micro’s internal controls. That review is still ongoing, the company said in a regulatory filing.
Representatives for Super Micro and Ernst & Young did not immediately respond to a request for comment.
